How to Join a Prop Firm

  • September 24, 2023

Prop trading firms have always seemed like a bit of a dark art in the online retail trading community – with some traders claiming to be funded by prop firms, but without elaborating on how to obtain funding yourself. Thanks to the rise of online prop firms, working with a prop trading firm has never been a more straightforward process! It’s not easy – but it’s straightforward!

In this article, we’ll be looking at exactly how to join a prop trading firm yourself and why you would want to! So, let’s get into it…

How To Join A Prop Trading Firm

 As a trader, you can’t scroll online for more than 5 minutes without seeing adverts for new prop firms popping up. The reality is, prop firms can be hugely advantageous for traders, as they allow traders to have access to a huge amount of capital and scale their capital beyond what would be possible with years of consistent compounding. Historically, prop firms were very much difficult to work with, and they only let the top 1% of traders through their doors. Now, with online prop firms, all traders have the ability to, in theory, take on trading capital and earn a much larger amount of profit from their trades.

 So, let’s take a look at the intricacies of prop trading and look at your options for becoming a funded trader…

What Is Prop Trading?

Prop trading is a simple concept that has been used in the finance sector for over 40 years now within traditional brick and mortar proprietary trading firms. Prop firms typically have a lot of capital at their disposal. They want to generate healthy returns on their capital but trading many different strategies, using numerous traders. Instead of ‘employing’ the traders on salary, most prop firms will offer profitable traders a lump sum of trading capital. For argument’s sake, let’s say £1,000,000 in trading capital. The prop firm will give the trader a few rules around the risk management, drawdown, and trading strategies that can be traded on the capital – to keep their capital as safe as possible in the markets. The trader will usually sign a contract and start trading the capital – in exchange for a profit fee.  

If the trader makes a 1% gain that month, that’s £10,000 profit on the £1M account. They may be given a 50% split of this money, meaning they bank £5,000 for their trading performance that month. This is typically how the industry works, obviously with large variations in the profit splits and amount of capital that firms are offering. For example, Lux Trading Firm offers up to £10,000,000 in real trading capital and a 70% profit split whereas some other firms offer £400,000 in demo trading capital and 85% profit splits.

Joining A Brick & Mortar Prop Firm

Joining a brick and mortar or ‘traditional’ prop firm is not easy, at all. They’re always on the lookout for traders, but typically want the cream of the crop – only the top 1% of traders that can generate consistently brilliant returns regardless of the market sentiment. Before even considering joining a brick and mortar prop firm, you’re going to need to have a track record of years of consistent trading performance using the same trading strategy. Ideally, this will be on a live account with a large sum of capital. Don’t even bother approaching a prop firm if you’re still trading on a demo account, regardless of how great your returns are.

You need to have a full trading portfolio of statistics to show them, and they will dissect all the metrics you provide. Your profit factor and Sharpe ratio will be crucial here. Your drawdown to profit ratio is also going to be vital, regardless of your trading strategy. 

If you have a great portfolio and a few years of track record on a singular strategy to show, approach as many firms as you can. Have conversations and work with whichever firm will give you the best terms in your contract!  

However, it may be worth skipping the majority of this and working with an online prop firm like Lux Trading – as you don’t need to spend years obtaining a track record to be accepted!

 Joining An Online Prop Trading Firm

Working with an online prop firm is a much more simple task than getting funding with a brick and mortar prop firm. Typically, online prop firms require no track record, but instead will make you undertake a trading challenge to verify your profitability and ability to manage risk. This may seem tiresome, but these challenges typically only take a month, or even less – which is much less time than spending a few years building a solid track record!

At a high level, the process is:

  • Sign up for a trading challenge and prove you can trade.
  • Once successful, you’ll be given login details to a trading account with capital.
  • You’ll trade that account as normal, withdrawing your profit split monthly in most cases.

It’s as simple as that!

You don’t even need to talk to folks at the prop firm in most cases – it’s all handled automatically, and you can be funded much faster than ever before. Don’t confuse the simplicity of the process with the process being easy, though – as it’s not! All prop firms will require traders to manage their drawdown, risk and still bank consistent profits within the markets. Many traders that fail prop firm challenges just ultimately were unable to manage their risk and therefore did not pass their challenge.

What Are The Benefits Of Joining A Prop Trading Firm?

There are gigantic benefits in trading with a prop firm, rather than trading solely your capital.

These benefits include:

  • Increased capital under management
  • Increased trading profits
  • Free up your capital for other projects in your life/other investments
  • Risk-free (it’s not your capital)
  • Rigid risk management forced upon you, which yields stronger trading results
  • Capital scaling to increase your capital faster
  • Trading mentorship and education
  • Risk management guidance (Lux Trading Firm has a risk desk for this)

These are the primary benefits, but traders often report many more benefits related to their mental clarity and improved trading experiences, due to leverage the institutional grade tools at their disposal. Ultimately, there is no correct approach – it’s advantageous to use a prop firm and trade with them, but it’s completely down to your preference as a trader!

In Summary – How Do You Join A Prop Firm?

In conclusion, joining a prop firm is a simple process, and you can become a funded trader in just a month or two if you choose to use an online prop firm like Lux Trading Firm. Working with a traditional brick and mortar prop firm will take much longer and require years of track record to get through the door.

Are you looking to get funded? Work with Lux Trading Firm today!